Financial Literacy Education Could Help Many Americans
EEven though the country is moving past the COVID-19 disaster, the supply chain problems persist. There are rising inflation, wage and labor pressures, as well as increasing interest rates. While Americans work to make sense of all this—and plan around it—lack of financial literacy makes it difficult for many. This knowledge is a threat to the American Dream for many. The private sector is able and required to address the problem by providing financial education to customers, employees and families.
There’s a big need for this kind of effort. The Financial Industry Regulatory Authority reports that only one-third Americans understand the basics of interest rates, rates for mortgages, and other financial risks. This measure of financial literacy is down 19% over the last decade. The gap cost Americans $415 billion alone in 2020.
Americans lack financial capacity, both at home and at work. The risk of developing serious conditions such as depression and diabetes due to stress over money is high. The cost of expensive treatment can make these life-threatening situations more stressful and costly. The second most common cause of divorcing is financial problems. 97% of workers admit that they spend time worrying or working on finances at work. Employers lose nearly $300 billion each year due to stress-related illnesses. 4 out of 5 employees admit that they are financially stressed.
These challenges continue to impact Black America. Over half of Black Americans, 54%) have a score less than 600 on their credit cards. This means they are essentially not able to take full advantage of free enterprise America. Half (54%) of Black Americans also report living paycheck-to-paycheck, as compared to 44% of Americans overall. Blacks make up only 43% of the population, while 72% are white. Blacks account for 14%, yet they own just 3.5% of all small businesses.
These numbers are not just statistical. There are many people behind the numbers: Tens of million of people, including seniors, who struggle with financial stress.
To help address these issues, we’re joining together to co-chair Financial Literacy for All, an inclusive, business-led movement aimed at helping more Americans reap the benefits that come from making more informed financial decisions. We plan to empower low- and middle-income individuals and families of every background, every walk of life and every community—from urban to rural and all points in between. To generate enthusiasm and awareness about financial literacy, our partners will help us to grow workplace wellbeing and financial literacy. They also provide support for initiatives that deliver financial education in all school districts across the nation. Given the huge wealth gap that exists between Black and Hispanic households and their income, our work will be relevant to these communities and make it easily accessible.
Nearly thirty CEOs and board members have joined the Financial Literacy for All movement since May last year. These include the heads of The Walt Disney Company and the National Football League and National Basketball Association.
We believe financial literacy can be inclusive, creative, flexible and focused on results, and we think our coalition’s diversity will help us make meaningful progress to that goal. Disney is known for engaging people with stories. Both the NBA and NFL know how to inspire and attract enthusiastic fans. Operation HOPE focuses on providing financial resources to help people build a safer future. Walmart has 1.6 million associates and more than 4700 stores that serve more than 137,000,000 customers per week in the US. Every member will do more to help its workers and their communities.
The core values of our purpose and values are what drive us to share our passion for better financial education. Walmart was established almost 60 years ago with the goal of helping people save money to live more comfortably. Operation HOPE strives to make economic opportunity more accessible and free enterprise more affordable for all since 1992. This new venture is a natural extension to what we organizations have been doing over the past decades.
These efforts can really make a difference. Operation HOPE is a great example. It provides no-cost financial education and coaching. Clients have been able to raise their credit scores by 54 points within six months and over 100 points in 24 months. They also lower levels of debt and help them save for the future. In some cases, they help strivers become homeowners or small-business owners.
Financial training is not enough to overcome the many financial problems facing American families. There are other factors that can hold people back. These include barriers to education and vocational training, financial services, job opportunities, as well as discrimination. These obstacles must also be addressed—and many in the private sector are making meaningful progress.
We believe that better financial education, and greater financial literacy, could benefit millions of families. This and similar kinds of work, lifts ‘all boats’ across communities and across our nation. Increasing GDP via improved financial intelligence benefits all of society and provides more opportunities for the country. And the added benefit—less stressed-out citizens and workers—translates into more societal health, for all. These are big goals, but we believe they can be achieved—and that’s the challenge we’ve set for ourselves. This movement is open to all business leaders.
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